[Congressional Record (Bound Edition), Volume 147 (2001), Part 3]
[House]
[Page 4063]
[From the U.S. Government Publishing Office, www.gpo.gov]



         MANIPULATION OF INTEREST RATES CAUSE ECONOMIC PROBLEMS

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Texas (Mr. Paul) is recognized for 5 minutes.
  Mr. PAUL. Mr. Speaker, today the Federal Reserve lowered interest 
rates by a half a percentage point. They have been asked to lower the 
interest rates by just about everybody in the country. Whether they are 
investors or politicians, everybody literally has been screaming at the 
Fed and Alan Greenspan to lower the interest rates, lower the interest 
rates.

                              {time}  1915

  It was anticipated that he would, and he did. He lowered the interest 
rates by 50 basis points. The stock market promptly went down 236 
points. So obviously just lowering interest rates is not the solution 
to the problems we face. As a matter of fact, I believe it is the 
problem.
  Interest rates have been manipulated by the Federal Reserve as long 
as I can remember, especially in the last 30 years since we have had a 
total fiat monetary system. So it is the manipulation of interest rates 
that causes a problem.
  In a free market economy, you do not have a central bank pretending 
it has knowledge it does not have, that it knows exactly what the money 
supply should be and what the interest rate should be. That is a 
prescription for disaster; and it leads to booms and busts, 
speculations in the stock markets, crashes in the stock markets. This 
is a well-known phenomenon. It has been with us since 1913, since we 
have had the Federal Reserve. We have seen it in the speculation in the 
1920s and the depression of the 1930s. It is ongoing.
  We have a responsibility here in the Congress to deal with this. We 
have a responsibility to maintain the integrity of the money. Yet we up 
that responsibility to a secretive body that works on its own, 
deliberating and deciding how much money supply we should have.
  To lower interest rates, a central bank has to increase the money. 
That is debasement. That is devaluing the money deliberately. In the 
old days, when the king would do this, they would clip coins. Literally 
coin debasement, stealing value from coinage in the old days was a 
capital crime. Today, though, it is accepted practice in all economies 
of the world. We have had no linkage of any currency of the world in 
the last 30 years to anything of real value.
  The economies have functioned relatively well. But just in the last 6 
years, we have had eight financial international crises, all patched 
together by more inflation, more printing of more money. Let me tell my 
colleagues, I am convinced it will not last, it will not continue.
  Take a look at what is happening in Japan today. Japan lowered their 
interest rates, too. They have been doing this for a long time. They 
are down to 0 percent, and nothing seems to be happening. Their stock 
market is at a level it was 16 years ago. We have to decide whether or 
not we may be moving into a similar situation. I think it is a very 
serious problem.
  We talk about interest rates. We talk about stimulating the economy. 
But we really do not talk about the problem, and that is the monetary 
system and the nature of the dollar.
  The money supply right now is currently rising at the rate of 20 
percent, as measured by MZN. This is horrendous inflation. This is 
inflation. Everybody says no, there are reassurances. The Federal 
Reserve and all the statisticians say there is no inflation. The CPI is 
okay and the PPI is okay. But there is inflation. Because if one 
increases the supply of money, one is creating inflation.
  The most important aspect of that is the instability it creates in 
the marketplace. It does not always lead to a CPI increasing at 10 or 
15 percent. Our CPI is rising significantly. We have other prices going 
up significantly, like education costs and medical care costs, housing 
costs. So there is a lot of inflation even when one measures it by 
prices.
  But the real problem with the inflation when one allows a central 
bank to destroy its money is twofold. One, it creates an overcapacity 
or overinvestment, excessive debt that always has to be wiped out and 
cleaned out of the situation, or economic growth cannot be resumed. 
Japan has not permitted this to happen, and economic growth has not 
resumed. That is the most important aspect because that causes the 
unemployment and that causes the harm to so many people.
  Now, there is another aspect of inflation, that is the monetary 
debasement that I have great concern about. That is, when it goes to 
extremes, it inevitably wipes out the middle class. It destroys the 
middle class. We are just starting to see that happening in this 
country.
  Low middle-income earners, individuals who are still not on the dole 
but willing to work, they are having a tough time paying their bills. 
That is the early stages of what happens when a currency is destroyed.
  Last year, for the first time in our history of keeping this record 
since 1945, in 55 years, the wealth of the American people went down 2 
percent.

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